see the world, with kids, before retirement

How We Paid off Our Debt While Living Abroad

Six years ago, my husband and I were desperate. We had a 4 month old, $50,000 in debt (all student loans), old cars, no cable or flat screen TV, and we could barely make our rent payment. We were sinking. It was enough motivation to move to another country in order to catch up.

My husband is a teacher. In case you weren’t aware, teachers in the United States aren’t exactly rolling in the dough. Honestly, I don’t know how any of them pay off their student loans (but that’s another blog). As of this writing (2017), the highest paying jobs for teachers from the USA, in the world, are working for the Abu Dhabi Education Council in the United Arab Emirates. That’s where we went. The plan was to increase our income and decrease our expenses.

Our strategy was to follow the Dave Ramsey baby steps while living abroad, just as we had in the US. We had already been doing those in the US, but we were getting nowhere and were absolutely buried in student loans payments. Step 1 was easy to complete by selling everything extra (save up $1000 emergency fund). But we completely stalled out at step 2 (use a debt snowball to pay off all other debts).

The debt snowball concept from Total Money Makeover is to pay off your smallest debt first. Then, whatever monthly payment you were paying towards that debt now goes to your next smallest debt. This “snowball” of debt repayment really picks up momentum as your payments get bigger and bigger.

Our little family of 3 moved halfway around the world (literally), to Abu Dhabi. No, we’d never been there before. But, we did know people who had and we did tons of research. We lived happily ever after and paid off our $50,000 in student loans in 2 years, just like we planned.

Not really. But wouldn’t that be great? It took 4 years. By the grace of God and the strategy of Dave Ramsey’s plan, we paid off $50,000 in debt in just 4 years!

But how exactly did we do that?

1. We made a precise budget and stuck to it. This might be the most basic and most skipped step. We used a simple spreadsheet in the local currency to track how much money to pull out in cash for expenses, and how much to transfer back to our home country each month to pay off debt.
2. Our monthly cash went into labeled envelopes. This is especially important when you are just getting the hang of a new currency. Actually seeing the cash come and go helps tremendously in getting used to the value of a currency you aren’t familiar with.
3. All “found money” went straight to debt. Absolutely all money that we ended up with that wasn’t planned for in our budget went straight towards debt. Babysit for the neighbors? Put it towards debt. Extra pay for working late? Put it towards debt. We didn’t spend all the birthday budget? Put it towards debt.
4. Some sacrifices were made. We didn’t go to out to eat as much as we wanted. We drove old cars. One summer, we even sacrificed a visit home, and put that money (provided by our generous employer) straight towards paying off a big chunk of debt.

It was hard to stay the path when so many of our friends and neighbors were living the “expat life” by going on fabulous vacations, buying the latest gadget, driving nice cars, and eating out all the time.

There were some setbacks: another baby and two different medical issues took all of our additional resources for a year. Those times, we hit pause on paying extra towards debt, stuck to an updated budget, and resumed doing so as soon as we could.

In the end, we stuck to our budget, stayed to the plan, and it was 100% worth it. In my opinion, it doesn’t really matter which system you use to become debt free, as long as you stick to it.

A Few Tips:
● Factor in a 10% mistake fee for yourself. Living abroad can often be unexpected and tricky. You will have unexpected government fees, currency changes, and grocery failures. We had a small line item in our budget just for this. Sometimes, we got lucky, didn’t need it, and put it towards debt.
● Find like-minded friends who are also living on less. These people will not only help you find the budget friendly food and events, they can be your friends along the way.
● Transfer money home every time you get paid. At first, we tried to hold onto the money and only transfer it every 2 or 3 pay periods. The temptation is just too great to spend that money. Just transfer it. What you spend in additional transfer fees, you will more than save in sanity and interest.

Once we became debt free, we were able to live like no one else. We have been able to save for retirement, save for travel, and eat out once in a while. We still stick to a budget. The big difference is that now, we pay ourselves instead of paying all the banks.

For pictures that correspond to this blog post check out our Instagram page @tooomanysteps